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Can you perceive our democratic process works? It could be along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. Legislation are enforced by the courts. End of story. Yet, that was how it operated in the past. Not anymore.

The Rise of Offshore Tribunals

Today, foreign corporations, or the oligarchs that control them, have the power to sue governments for the laws they pass, at private courts made up of corporate lawyers. The cases are conducted behind closed doors. In contrast to domestic courts, these bodies grant no opportunity to appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, including enterprises operating from this country. The door is open only to businesses registered abroad.

When a secret court rules that a legislative action could harm the corporation’s anticipated profits, it may order compensation of hundreds of millions, even billions.

This compensation are based not on real financial harm but funds the panel members conclude the company would perhaps have made. The administration may have to abandon its policy. It becomes discouraged from introducing similar legislation of a similar nature, due to the risk of facing litigation.

A Process Growing Exponentially

Unprecedented levels of legal actions are being initiated, as companies take cues from each other, and investment funds finance suits in exchange for a share of the awards. The outcome? Democratic sovereignty and popular rule are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the decisions made by parliaments is that this provision has been incorporated – absent public approval, and often in conditions of total confidentiality – within trade treaties.

A Real-World Case: The UK Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The judge found that proposals to open the first new deep coal mine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the Conservative government, which had endorsed the extraordinary assertion that the mine could have zero effect on our carbon budgets. The new government later cancelled the permission the previous administration had granted. Currently, this victory could be compromised by an foreign court answering to exclusively the corporations filing the suit.

In August, a company whose ultimate owners reside in the Cayman Islands lodged a claim challenging the UK government. The previous week a tribunal in the United States was established to hear it.

This firm is suing the UK for the money it would have generated if the mine had been allowed to proceed. We have no clear indication how much this sum represents. What legal team is serving as its counsel against the UK administration? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the high court validates it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a elected official acts on its behalf.

The Russian Challenge

Simultaneously that the panel on the mining lawsuit was convened, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case at present, but it is highly possible that he may employ the arbitration process to challenge the restrictions the UK levied against him following the Russian aggression. He has already started suing another European state with similar intent, seeking sixteen billion dollars: an amount representing half state's yearly budget. Among the counsel on his side? Cherie Blair, wife of the previous PM.

Trade specialists believe that the EU’s delay in using frozen Russian assets as security for its financial support package is due to Belgium’s fear that it could be sued in the offshore corporate courts, under a trade agreement. This extraordinary, secretive influence over sovereign states could be blocking the finance Ukraine urgently requires.

Empty Promises and Mounting Risks

Politicians promised that these scenarios were not possible. Previously, a former prime minister, promoting the largest and riskiest of all these agreements, stated: “The UK has signed trade deal upon trade deal and there has not been a case in the past.” An expert on this matter labelled campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message appeared to be that only poorer nations had to worry about ISDS claims. Predictions that “as corporations start to realise the authority they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were met with general mockery.

That prediction has come to pass. This year, fossil fuel and extraction companies have initiated a record number of suits against nations rich and poor, opposing – similar to the Cumbrian coalmine – official measures to stop climate breakdown. Corporations have so far won vast sums through ISDS, of which oil majors have secured eighty-four billion dollars. That equates to the combined GDP